Distance To Default In Listed Companies' Financial Crisis Early-warning Model

Once the listed companies were in financial crisis, loss of shareholders or creditors was unavoidable. At the same time the expected values of stocks, bonds and other claims are closely related to the estimation of the company's financial crisis, so the crisis early warning model of company's financial is one of most important issues for a long time.At present, the researches of the company's financial crisis early warning model were mostly limited to the annual financial data in public annual financial report, therefore overlooked the performance of capital markets—stock price fluctuations, the relevant quarterly data, industry influence. This paper attempts to establish a more comprehensive, dynamic early warning model of listed company financial crisis, considering default indicators reflected the listed companies' stock price and volatility, relative quarterly financial data, and industry influence.This paper defines "financial crisis" as a series of crisis incidents with logical relationship, and gives the standard of the definition of financial-crisis-company from the special treated listed company and the occurred time.According to KMV model theory and the option pricing model, this paper calculates the value of the listed companies' assets and fluctuations and the Default Distance by Matlab programming. The paper verifies that it is feasible to using the Default Distance into the financial crisis early warning model from both theoretical and empirical.This paper chose 56 listed companies in information technology industry (including 14 companies were in "abnormal financial situation"), collected quarterly financial data and stock price, finally set up a more dynamic logistic crisis early warning model.By comparison, the model considering Default Distance had better fitting degrees and forecast results. The analysis of Datang Telecom (* ST Datang, 600198) shows that, even in the presence of false financial indicators, the Logistic warning model considering default distance was more effective.